Good site

Will take a deeper look.

http://www.manageyourowntrades.com/

The rich and the poor

Conflicts between the poor and the rich

The rich, the middle class and the poor.

If I were making more than a million dollars a year, I would consider giving up my US citizenship and moving to some island where I do not have to pay much for taxes. I can live like a king just with the saved taxes. Besides patriotism (paying back to the adopted country for me), we should make this decision similar to evaluating the potential appreciation and risk of buying a stock.

The middle class like myself who cannot migrate with the entitlements that I already have paid for are suffering and will suffer more with more taxes coming.

The poor are taking advantage of the middle class. Since there are more poor than the rich, the politicians have to satisfy this group. However, the poor will suffer too when more from the middle class will become the poor after the heavy taxes that will affect us personally and the economy.

How the classes are formed.

My theory. How we become rich or poor.

* Becoming rich.

1.       Via inheritance.

You have to ask God why if you do not belong to this group. When you was born in USA instead of in Haiti, you already hit the jackpot.

2.       Taking chances.

We all take chances in life on some opportunities, which could turn out to be traps and make us poor instead.

3.       Hard work.

Our family should teach us to work hard at an early age.

4.       Save hard.

You should not be punished for saving money.

5.       Smart.

It could be part of the inheritance. It is important to some but not to most of us in the middle class.

6.       Luck.

When you take chances even with educated guesses, a lot of time luck plays an important role for its success.

* Becoming poor.

1.       Lazy.

2.       Spoiled by our generous welfare.

3.       Big spenders.

4.       Unfortunate.
      Born poor. Lost in taking chances.

We should help the folks in category #4 only.

The ultimate democracy?

It is controversial but it could be logical at the same time on how we allocate our taxes.

We should tell the government how to spend our taxes by establishing what percents of the taxes on what category such as war, welfare, social security, education, research.... via ballots.

If you do not pay tax last year, you cannot decide on this. This is called ‘representation with taxation’.

ALU

To conclude my thoughts on this thread:

* I did buy ALU at $1 but with half of my current bet for a stock.

* After reading the comments and two articles plus some previous articles from WSJ, I change my opinion on ALU. I'll not buy any more. It has same chance to go to 50 cents or $1.50 in a year for the following reasons.

* To go to 50 cents.
- The company is not recovering esp. with the global recession that I expect to continue with Obama's policy and the EU crisis.

- It could bankrupt if they cannot service their long-term debts that is larger than the entire market cap.

- The problem is not management as the stupidest fool cannot make it that worst. However, they have to lay off more than the announced to save some cash.

- The problem is China, namely Huawei. I have friends retired from Lucent and one still working in Bell Lab. I estimate their average compensation is over $200K for top engineer (some have patents) and researcher (most are PhD from top universities). Chinese engineers and researchers have a fraction of this compensation.

China is a major market for Huawei and when it IPOs, it would add wings to its already strong body; a public corporation will attract professionals and leaders esp. for this size. China's huge market will be a good customer base for Huawei.

It reminded me of one apparel stock I owned. It could not compete with low-wage country even before lifting the embargo to China. When the management did not do anything positive, it will die.

* The reasons it will go to $1.50 next year.
- Cisco may buy it with a combination of stock and cash and it is better than giving dividend (that has raised the stock price and great for those who have options).

Cisco does not have the state-of-the-art technologies that ALU, Huawei and Ericson have. It will be a strategic buy but 2B plus the hefty debt is not too easy to swallow.

- EU intervention with US's help.
EU is a mess now and I do not think they can bail it out. I expect they will encourage EU and USA to buy ALU's products and stop Huawei.

Cisco is successful in doing so arguing with security reason. It is not a valid reason as some of the internet traffic has been routed to Huawei's products already.

It is too risky for me and there are plenty of safer bargains else where.

Making over $100,000 without working!

Some one forwarded me the following article. It is not too hard to understand the problem of this country. It is not the rich, not China (actually China saved GM from the second bankruptcy), but the poor who take advantage of the middle class and our constant involvement in foreign wars.

The rich who lay the golden eggs just fly to another country when they're taxed to the maximum.

The question is how we pay for these parasites and for how long before we're bankrupt if not already.





-------------------------


It seems that every couple of days New Orleans loses one of its treasured ENTREPRENEURS .

(Not shown is the obituary about a 25 year old guy)

Let’s get the players straight before we go on with this..


LARMONDO "FLAIR" ALLEN

His Companion : Kawanner Armstrong

His Sons : Christian Allen
Kwan Allen
Larmondo Allen, Jr.

His Daughters : Deidra Allen
Larmenshell Allen
Lamonshea Allen
Larmomdriel Allen
Larmerja Allen
Korevell Allen
AT AGE 25 - He had 9 Children.


His Father: Burnell Thompson
His Mother: Esther Allen
His Stepfather: Bruce Gordy


His Brothers: Burnell Thompson
Edgar Thompson
Wil Willis
Danta Edwards
Reshe Edwards
Mattnell Allen
Burnell Allen
Lester Allen


His Sisters: Shannail Craig
Lekiksha Thompson
Gwendolyn Carter
Jessica Willis
Katina Gordy


Grandparents: Delors Allen
J.C. Allen
Anna Laura Thompson
Will Thompson


GOT THE ABOVE ALL STRAIGHT?


********************
NOW, THE REST OF THE STORY

He was 25 and had 3 sons and 6 daughters.
NINE welfare recipients collecting $950 each .....

That equals $8,550 a month!
Now add
Food Stamps ,
Free medical, Free school lunches,
and on and on

Do the math... $102,000+ /year.

Anyone out there, sittin' on their butt while reading this e-mail, making
A HUNDRED GRAND doing nothing?

Now that, to me, is a real Entrepreneur.

(ALSO, BECAUSE OF THEIR FATHERS DEATH, ALL OF THE KIDS WILL COLLECT
SOCIAL SECURITY UNTIL THEY ARE 18)

EVEN BETTER...IF "FLAIR'S"
THIRTEEN BROTHERS & SISTERS
FOLLOWED HIS ENTREPRENEURIAL
STRATEGY--THAT'S AN ADDITIONAL
$1.3 MILLION PER YEAR

BUT WAIT...THERE'S MORE!

IF ALL THIRTEEN BROTHERS AND SISTERS CAN
DUPLICATE HIS FEAT OF 9 WELFARE STRATEGISTS
THAT BREEDS 117 NEW RECIPIENTS COLLECTING $100,000/YR!!...OR AN ADDITIONAL
$11,700,000 PER YEAR...
and, THAT'S ONE DAMN FAMILY!
(And demands 100% the Taxes Paid by 1,000 avg. taxpayers)


And THAT is why this once great country is
BANKRUPT!

ANY QUESTIONS?

Are you the investor also the owner of the business

It cannot be to me. If I have 20 stocks, I do not have the time to run 20 businesses. I do not have to hire, fire, plan... I do not put most of my eggs on a business as most business owners do. It is just saying to a policeman or a fire fighter I pay your salary. It is only true for your ego and nothing more.

Who are the owners that will affect the companies' strategies? Not you as a retail investor, but the big mutual funds, pension funds... and then the insiders who usually suggest how you should vote.

I ignore all these vote requests as I usually have about a hundred of stocks (less today). I do not even have time to read all their suggestions.

To illustrate, the hedge fund who owns most of Sears shares pretty much make the decisions. I made money on Sear not by keeping Sear as a company, but trading the Sear stock.

The decision to trade a stock for me is the potential appreciation of its stock price (via many researches by others). I trade the company by a click of the button, and there is no emotion attached to the button as I'm not the owner but a investor.

Frankie's misadventure

Frank wrote:

Here's the thing small investors have to remember. Quite often the market gets it TOTALLY wrong. There is a herd like mentality amongst investors and stock analysts that is quite extraordinary to behold. Now, of course, it does help if you understand what you are doing, but quite often all it takes is common sense to work things out.

Currently I am holding a stock, which I bought 9 months ago. I should mention that before I buy any stock I do a rigorous analysis of what I'm buying. I will not buy a pig in a poke. And I loved Decker Outdoor at $90. I'm the kind of guy that will crawl in and around the financial statements and examine a company from every conceivable perspective. They are the company that make the UGG boots that women love. Now the thing about DECK is that its a simple company with a simple business which is easy to understand. They make boots and foot-ware and have acquired a bunch of companies that sell niche footware such as sports shoes etc. But UGG is its major brand. At the moment its responsible for 87% of the company's revenues.

So you can understand my astonishment as I watched the stock plummet by some 60% over the past year. On closer examination it appears that investors (particularly analysts) are freaking out because DECKs inventories have increased substantially over previous years. Moreover, sales have slowed and input cost have risen dramatically. Because of a combination of factors, its been a Frankenstorm of a year for DECK. DECK's had its worst year in a decade. But as bad as its been, the company hasn't actually lost money. Just that this years earnings haven't been as robust as prior years.

What amazes me is that so called "sophisticated" analysts are running around like Chicken Little saying, "the sky's falling in, the sky's falling in". Analysts have been writing all sorts of nonsense that makes me wonder how they got their job in the first place. Amazingly it appears that many analysts don't have a clue how real businesses operate. I'm not going to get into the details here because you can read up on the stock on seeking alpha for yourself.

Suffice it to say, you have to take a lot of what these people say with a huge pinch of salt. So what have I been doing? I've been buying the stock all the way down.

You have to realize that just because a stock is declining is not necessarily a bad thing. The most fundamental lesson that Buffet teaches investors is that the cheaper you buy a stock the greater your return will ultimately be. I initially bought DECK at $90. Currently it is trading at under $30. Of course, I would love to have been able to look into the future and known that I could purchase the stock at under $30 just 9 months later. But that just isn't reality in the stock market. What I can do as an investor is average my price down. And that's precisely what I've done and what I will keep on doing. The lower it goes the more I will buy. Because I've examined the company very thoroughly. Ultimately I know I am going to do very well thank you very much. Because I'm not interested in buying the stock for a quick flip of 100% or 200%. I'm in it for the long haul. Over the long haul I expect DECK to increase by many multiples of my original cost. And the lower I can get my price down the greater my ultimate return will be. And sooner or later the company is its going to pay me dividends which will also increase over time.

Life's good if you're an investor. You can take advantage of other peoples stupidity. But one thing you will learn is not to take too seriously everybody else's opinion. In many respects its totally irrelevant. 

----
My reply:

Hi Frank, thanks for sharing your experience. A bad one could be more important than a good one for us to learn and avoid similar problem. I will save it in my blog for future reference. Let me add my two cents and please argue whether they're valid. This is one way to learn.

* I had a similar experience with CROX. It was manipulated by shorters, It is similar here as your DECK has almost 40% (short interest as a % of outstanding sharing from Fidelity).

It is being manipulated by large hedge funds and retail investors could not be the leader of the herd. I doubled down on CROX and it lost another 25% and finally on the last double down that made more than 100%. However, the whole deal is a losing one.

* I advise not to place extra bet on a losing stock. However there are exceptions. Let's take a look.

- The P/E is 7. Quite good. However, I have not checked the expected P/E and I bet it will not be as good.

- Can it recover? Most likely so. Their main problem was due to the warm weather last year. Most likely it will not repeat unless we've a prolong global warming.

Unlike the ugly but indestructible shoes by Crox, it needs replacement every few years - a good point for DECK. It is a high-end product and you need a good economy to support it - a negative point for DECK.

- With this low price, potential to appreciate... I placed some buy orders. I put money where my mouth is.

* At one time, we said 'Crox is no Deck', and now we say 'Deck is no Crox'. The point is the stock and market changes and we have to adjust to it.

* I prefer to 'buy low and sell high' than 'buy high and sell higher'. Deck and Crox are good examples.

* Diversification should be emphasized again. If you have 20 stocks instead of 1, you still have a good sleep even losing 60% of one stock.

Hope it turns out good for you. 

Buffett's miserable performance in last 3 years

No one invests in a 3 to 5 years timeline. However, we change strategy in 3 to 5 years (actually I change far more often esp. when there is a reason to).

Buffett did not perform in last 3 to 5 years. Do you remember Fidelity's Magellan Fund? It was great for a while and I invested in it riding the wagon. Then it did not perform due to it was getting too big (and the fund manager knew the problem and he quit to save his glory). I moved all my Magellan holding to other fund and spared me the non performance of years to come.

Many fellow investors did not abandon the Titanic for the following reasons: 1. They believe it will come back (and they never did), and 2. Try to save the huge capital gain tax if they have it in a taxable account. The result is losing opportunity to make money by switching to other funds.

The rear mirror is always clearer. However, if you do not learn from history, history will repeat itself. Do you think Buffett's funds will appreciate for sure? No one can predict the outcome correctly and consistently. To me, there are more problems down the road like who will lead the group....